In a typical supply chain network each location replenishes inventory from a primary supplier. In many business environments, however, locations may also source inventory from alternative suppliers when their primary supplier is out of stock or cannot deliver inventory on time. With the availability of alternative suppliers, excess inventory in the network may be distributed so that orders can be fulfilled with lower cost and a faster delivery time. This is referred to as multi-echelon inventory planning with lateral transshipment.
In accordance with the teachings described herein, systems and methods are provided for optimizing inventory in a multi-echelon inventory distribution network having at least a first echelon and a second echelon. An example method may include the steps of: receiving information identifying an inventory pool that includes at least two inventory locations within the first or second echelons; determining inventory excesses or shortages at inventory locations within the inventory pool; determining an inventory transshipment plan for transferring inventory between two or more of the inventory locations in the inventory pool based at least in part on the inventory excesses or shortages; and determining an inventory replenishment plan for replenishing inventory at one or more inventory locations in the first echelon from one or more primary supply locations in the second echelon, the inventory replenishment plan being based at least in part on the inventory excesses or shortages and accounting for any inventory transfers identified in the inventory transshipment plan.
Another example method of optimizing inventory in a multi-echelon inventory distribution network may include the steps of: determining optimum inventories for a plurality of inventory locations in a first echelon of the multi-echelon inventory distribution network based at least in part on a demand forecast; determining inventory excesses or shortages at the plurality of inventory locations in the first echelon based at least in part on a comparison between the optimum inventories for the plurality of inventory locations in the first echelon with actual inventories for the plurality of inventory locations in the first echelon; determining inventory transshipments between two or more inventory locations in the first echelon based at least in part on the inventory excesses or shortages at the plurality of inventory locations in the first echelon; and determining inventory replenishments from one or more inventory locations in a second echelon of the multi-echelon inventory distribution network to the plurality of inventory locations in the first echelon, the inventory replenishments being based at least in part on the inventory excesses or shortages at the plurality of inventory locations in the first echelon accounting for the inventory transshipments between the two or more inventory locations in the first echelon. Embodiments of the method may also include the step of: estimating delivery delays for inventory replenishments between inventory locations in two or more echelons of the multi-echelon inventory distribution network, wherein the optimum inventories for the plurality of inventory locations in the first echelon is further based on the estimated delivery delays.
A system for optimizing inventory in a multi-echelon inventory distribution network having at least a first echelon and a second echelon may include one or more processors, one or more memory devices, and central inventory optimization software stored on the one or more memory devices and executable by the one or more processors. When executed by the one or more processors, the central inventory optimization software may be configured to: receive information identifying an inventory pool that includes at least two inventory locations within the first or second echelons; determine inventory excesses or shortages at inventory locations within the inventory pool; determine an inventory transshipment plan for transferring inventory between two or more of the inventory locations in the inventory pool based at least in part on the inventory excesses or shortages; and determine an inventory replenishment plan for replenishing inventory at one or more inventory locations in the first echelon from one or more primary supply locations in the second echelon, the inventory replenishment plan being based at least in part on the inventory excesses or shortages and accounting for any inventory transfers identified in the inventory transshipment plan.